Auto Finance

Transparency Wave Rolling Into F&I

More than 500 exhibitors lined the aisles inside the Las Vegas Convention Center for the National Automobile Dealers Association’s annual convention and exposition, which was held March 22-25. (Photo Courtesy of NADA)

Digital retailing was back in the spotlight this past March at the National Automobile Dealers Association (NADA)’s annual convention, with every new or retooled solution on display inside the Las Vegas Convention Center serving as a reminder of the big decisions ahead for dealers when it comes to their operations and their biggest profit center: F&I.

Dent Wizard’s Lindsey Bird could feel the changes in the air. He believes opening three new wheel remanufacturing centers and growing its 2,300-person dent repair network has the ancillary product provider in a great position as wheel trends and other market pressures place a greater focus on the claims fulfillment process.

“Everybody got into ancillary products a few years back, where we had kind of a niche,” he said. “But now we’re seeing more people coming to us and saying, ‘OK, we need to manage claims. We need to manage the repair process, the severity.’”

Dent Wizard’s Lindsey Bird said the story of NADA 2018 is all the consolidation taking place in the agent space and F&I product provider realm. He believes it’s a sign of things to come, as the digital retailing push continues to cloud the F&I industry’s future.

What has caught Bird’s attention of late is all the merger-and-acquisition activity in the agent and F&I product provider spaces. The list includes IAS’s February 2014 merger with First Dealer Resources, iA Financial Group’s recent purchase of SouthwestRe and Dealer Assurance Co., Portfolio’s acquisition last June of California-based Finance Concepts LLC, and Assurant’s purchase of The Warranty Group last October.

“The idea of getting into the F&I business as an agent today, I think, has shifted immensely, and you see people that have a good block of business — that have established it for many years — being targeted by a lot of the nationals,” he said. “So we’ve seen a good number of acquisitions, and I think it’s all about trying to grab more market share.”

Scott Karchunas, president of Protective Asset Protection, said the company’s August 2016 acquisition of United States Warranty Corp. was about getting larger. Driving that strategy, he added, are all the unknowns surrounding digital retailing.

“Have you ever traveled abroad? Well, sometimes people bring along that plug that has like eight different types of adapters,” he said. “Well, we’re at the point right now that we don’t know what the plug looks like that we’re plugging into. What we’re trying to do right now is make sure all of our platforms are rationalized [and] flexible, so when we finally get a read on what the outlet looks like, we’re in a position to make reasonable investments to plug in.”

In U.S. Warranty, Protective acquired a 40-year-old specialist in dealer-owned warranty companies, a reinsurance model that allows dealers to own their service contract company, customize their product and claims adjudication process, and pay Protective a fee to manage everything. Karchunas said DOWCs deliver the flexibility, transparency, and price efficiencies dealers will need as more F&I products venture online.

“Once these products sit out on the web, we’re going to have data people come in and set up aggregator sites that will allow the customer to see what they should pay and where they can get the best price,” Karchunas said. “So I don’t know what’s going to happen, in the long run, to gross profit margins and service contracts. But it’s probably not going to go higher as the transparency wave hits, and dealers are saying, ‘You better get it figured out.’”

‘Replatforming’ for the FutureWhile peering into the future their solutions will soon deliver, even tech vendors mixed in messaging about how their tools are designed to help dealers navigate today’s compressed margin environment. But even they seemed to be rethinking their approach, with “replatforming” emerging as the keyword among the Dealertrack and Reynolds and Reynolds teams.

For Dealertrack, that meant replatforming its F&I platform to power the online experience its new Accelerate digital retailing platform — which was made available in the Las Vegas market in March through dealer listings on Autotrader and KBB.com — will deliver, and the instore experience its VinSolutions CRM Connect system will manage. Jason Barrie, vice president and general manager of Dealertrack F&I, referred to it as the “Digital Showroom.”

Harnessing all the capabilities of Dealertrack F&I and VinSolutions, Dealertrack’s new Digital Showroom is designed to manage the in-store experience for shoppers who begin their buying journey online. The application is currently in pilot and will soon feature Dealertrack’s new online digital F&I menu.

The company’s new platform, which is currently in pilot, currently contains Dealertrack’s online credit application, bureau functionality, compliance tools, vehicle evaluation solutions, third-party integrations, and a beta version of a new online F&I menu. “So Mark O’Neil’s vision of this connected retail experience, it’s kind of living and breathing under the banner of Cox Automotive now,” Barrie said. “Dealertrack F&I is powering that online experience, and then you have Dealertrack F&I and VinSolutions providing the workflow in the store.”

Now begins the gradual process of moving dealers onto the new platform. Barrie said the company is keenly aware of the loyalty dealer staff have for the old system. He added, however, that the changes taking place are really rooted in the company’s dealer clients wanting a single platform to manage that online-to-instore experience.

“I know we’ve been talking about dealers looking to consolidate their tech vendors for years, but conversations are intensifying,” he said. “So I think you’re gonna see some calculated partnership investments, where dealers are going to say, ‘Who can I work with that can help deliver a better experience online and instore with functionality that’s alive and real today?’”

Reynolds has spent the last decade replatforming its DMS and ancillary solutions, using the recovery from the Great Recession to move to a single-infrastructure approach to the business. It then spent the last five years migrating dealers from the old green screen. “We’ve reached a tipping point of how complete our system really is, as well as dealer adoption, and beginning to really change the way they retail,” said Jon Strawsburg, vice president of product planning.

Unifying solutions on a single platform meant retooling the software inside solutions like docuPAD, which, according to Strawsburg, closed approximately 1.6 million vehicle sales last year, a more than 30% increase from 2016.

The company’s replatforming efforts resulted in an ecosystem that lives within its retail management system, where calculations and functions are performed and data is passed between its retail tools and solutions. That lead to the company’s coining in 2016 of the term “eWorkflow,” which is essentially a digital deal jacket that moves through the RMS from sales to F&I to finance sources through its Open Dealer Exchange (ODE) connections.

Now Reynolds is exposing that ecosystem to online car buyers through a portal called MyDealBuilder, which the company showcased to dealers behind closed doors at NADA 2018. It represents Reynolds’ first foray into online vehicle sales.

Pictured in front of Reynolds and Reynolds’ docuPAD system are Kasi Edwards, vice president of marketing, and Ed Pontis, director of product planning. The latter said the F&I system will play a central role in the new online car-buying experience the company showcased to dealers behind closed doors.

“Are dealers ready for this digitization? I think some of them are starting to figure it out. We just wanted to make sure we have the highway built,” Strawsburg said. “So now, when a car buyer is in MyDealBuilder purchasing that car online, they’re using the RMS functionality to do that. They’re creating a deal, looking at rebates, incentives, and rate residuals, and they’re booking out their car based on the settings in the RMS.”

Reynolds’ ultimate vision is for that experience to end at a docuPAD station, where a dealership employee conducts the compliance disclosures, collects signatures, and, most importantly, sells F&I products. And the hope is for those deals to be funded before customers drive off.

Mercedes-Benz Financial Services is the first to connect into that ecosystem. And with ODE’s expanded alliance with RouteOne, Ed Pontis, director of product planning, said those connections should accelerate. “We are rolling it out state by state now with Mercedes-Benz,” said Pontis, noting that Volkswagen Credit is on deck to connect. “So through docuPAD, we’re now able to sign the contract directly, submit it to the vault, and within Mercedes-Benz, they are spending anywhere between eight and 15 minutes to fund the deal.”

The CRM AdvantageDealerSocket, which launched its Precise Price digital retailing platform last year, and ELEAD1ONE, which unveiled its DealBuilder ecommerce tool at NADA 2018, not only think they have the parts to connect the online to instore experience, they believe they have the advantage over the DMS providers.

“We all know salespeople aren’t great at having to go to a bunch of different tools, so it needs to be accessible and it needs to make sense,” said ELEAD1ONE executive Bill Wittenmyer. “So when you use the CRM as the backbone, and then the rest is all these different appendages — whether it’s digital retailing or marketing — it all still needs to connect to the body.”

Aaron Schinke, DealerSocket’s senior director of product management, added: “So if you connect it straight to the DMS, yeah, you can have that down-to-the-penny payment, but you can’t really enable the rest of the experience, whether it’s the follow-up, the marketing, moving people through the funnel, understanding where they start and stop the process.”

DealerSocket’s Aaron Schinke and Steven Meeker demonstrate new features added to the company’s Precise Price digital retailing tool. They include the ability for car buyers to schedule test drives or vehicle deliveries from within the platform, and a new web credit app and soft-pull feature powered by Credit Bureau Connection.

Schinke noted that having Precise Price hooked into the company’s legacy desking system is what really gives DealerSocket the advantage. “The fundamental difference is the calculations you see in our digital retail is actually powered by the desking system, which is obviously calibrated to the DMS. So you can expect down-to-the-penny accuracy.”

This year, the company has added the ability to schedule a test drive or a delivery through Precise Price. DealerSocket also equipped its digital retailing system with an integrated web credit app and soft-pull feature powered by Credit Bureau Connection. Both features feed into the CRM and are designed to work online or in the showroom on a tablet device. For the latter, a salesperson can email the customer a link to the credit app, or simply use DealerSocket’s mobile app to scan a customer’s driver’s license to perform a soft pull.

“Think about the advantage of knowing upfront in the sales process, before you’ve spent two hours on the lot getting them excited about a car they don’t qualify for,” said Steven Meeker, DealerSocket’s chief of staff. “The other half of that is double entry. Customer does it online, comes to the store, and they’ve never heard of you. So having this enabled in the CRM, being able to push it, you never have double entry.”

ELEAD1ONE’s Wittenmyer said the tech firm put its DealBuilder tool through a six-month pilot before installing it at Florida’s Wesley Chapel Lexus two months ago. The dealership, the first new Lexus point awarded in 12 years, has been testing the system ever since. Today, 21 Apple iPad-equipped salespeople are using the firm’s DealerBuilder Showroom app to walk customers through the entire buying experience.

Pictured is a screenshot of ELEAD1ONE’s new digital retailing platform, which the CRM provider debuted at NADA 2018. Company executive Bill Wittenmyer said the tool is currently installed at Florida’s Wesley Chapel Lexus, the first new Lexus point awarded in 12 years.

Wittenmyer said the solution also delivers to-the-penny payments, with the customer’s credit score, and state and local taxes and fees incorporated into that final price. He added that DealBuilder can hook into whatever service a dealership uses to appraise trades, whether that’s Kelley Blue Book or Black Book. But in real time, a dealership staffer can guide customers through the process within the tool.

And through a new relationship with Darwin Automotive, which was announced days after the convention, DealerBuilder will also be able to handle F&I product sales. “I was an F&I director for a large group in Florida for a number of years, so the next thing I’m going to say pains me and hurts my soul, but I know it’s reality,” he said. “In the next five to 10 years, we’ll see more change than we’ve seen in the last 50. And that’s gonna include the reduction of the number of F&I managers and sales managers inside the dealership.”

Plugging InNot all innovations in the dealer retailing space were on display inside the Las Vegas Convention Center; some were being demonstrated in hotel suites or on laptops as their creators walked the show. Two such companies were Roadster and Carvoy — startups that began as car-buying marketplaces before becoming dealer solution providers.

Roadster launched its Express Storefront platform in October 2016, two-and-half years after CEO Andy Moss founded the startup as a California broker site. Today, the platform operates in 36 states and counts several major dealer groups among its users. The firm’s first big catch was Penske-owned Longo Toyota in El Monte, Calif.

“Longo was obviously a big win for us in terms of handling their volume, and that continues to go very well,” Moss said of the dealership, which retailed about 22,000 new and used vehicles in 2017 and sits on more than 50 acres. “So today, we’re adding between 30 and 50 dealers a month.”

Roadster was one of the first digital retailing providers to adopt an omnichannel approach, with its Express Storefront able to put the entire car-buying experience online or in the hands of an iPad-equipped salesperson. This year, the company added the ability to operate its software on a showroom kiosk, which Moss said works as kind of a showroom marketing tool for browsing or service customers.

In January, the company rolled out a more tightly integrated version of its buying platform. It’s designed to sit on top of a dealer’s vehicle details page (VDP), sliding out once the customer clicks on the “Build Your Deal” button.

At NADA 2018, Roadster launched “Express Marketplace,” a tool aimed at turning a dealer group’s “home” site into an ecommerce portal. It aggregates a group’s entire inventory along with Roadster’s ecommerce experience. “So that gives the dealer the ability to do some cool things,” Moss said. “If they are a very tightly located group, like an auto mall, it may actually be more efficient for them to sort of do their regional advertising at the group level. It also gives them a consistency of experience from a training perspective, from a sales process perspective, from a customer satisfaction point of view.”

Pictured is a screenshot of Carvoy’s broker site, which the startup launched in New York in May 2016. In February, the company rolled out Carvoy Ignite, a Software as a Service platform dealers can deploy on their websites to transform them into car-buying portals.

Daniel Yuabov was in the midst of his two-year-old startup’s transformation when he stepped onto the NADA show floor this year, having made the switch from a New York broker site to software provider in February with the launch of Carvoy Ignite — a SaaS platform that turns a dealer’s website into a car-buying portal. The new offering includes a digital dashboard offering real-time analytics, inventory tracking, automated desking, F&I package options, trade-in valuation tools, and customer credit approvals.

“So we have very cool technology that we built with our own money, that we think consumers really enjoy,” he said. “To scale that properly, we needed to own the inventory. But we’re not allowed to because we’re not a franchised dealer. So we thought, how can we really make this technology, this experience, at scale? So we packaged it into a plug-in dealerships can then deploy on their websites so this entire checkout experience rests native on their websites.”

Within a year of launching its marketplace, Carvoy had attracted 300 dealers — a network the startup is now leveraging under its new strategy. “Now we’re in the trenches, because we are not free,” he said. “We’re no longer performance-based; we’re an engagement platform — a Software as a Service-type subscription, which requires a lot more effort.”

But Yuabov feels Carvoy has a competitive advantage given the company’s roots; it facilitated the deals, and handled the customer service, vehicle deliveries and trade-ins. From that experience, the company collected data on how consumers actually shop for cars online.

“I actually went and delivered cars, which I’m always proud to say,” he said. “I picked up the customer service calls, saw where the customer pain points were. At the same time, I saw where the dealers’ paint points were. And Carvoy was able to build that bridge very quickly, because we had that data and that advantage.”

(Photo Courtesy of NADA)

Carvoy Ignite is currently being used by a handful of dealers in New York; Yuabov revealing that the startup is also beginning to pick up more dealers in Florida. California is the next target. The only thing the platform can’t do, from a compliance standpoint, is accept digital signatures. Yuabov said the startup experimented with RouteOne’s eSign technology, which allows for remote signature capture on an iPad, and other solutions. Ultimately, the company opted to let dealers process the paperwork.

“Yeah, they don’t want to change that, but they need to. In fact, they need to change their F&I department, and they need to change all the accounting,” he said. “Signing documents is not a pain point. The pain point is transparency.”

The Closer“Flexible” was the word technology vendors used to describe their systems. Some went so far as to say their digital retailing solutions empower dealers to rethink their business models. All agreed that finance needs to move upstream in the digital environment. What that means for the F&I profession is anyone’s guess.

“Listen, F&I is a critical profit center for the dealership. To use tools to enable that, whether it’s docuPAD, MaximTrak, Dealertrack, Darwin, or whatever it may be, it’s a tool that enables. It’s not a robot,” Dealertrack’s Barrie said. “Are there organizations consolidating F&I? Yes. Are there organizations getting rid of a dedicated F&I person? Yes. Do I see value in the F&I manager? Yes, 100%. This is an evolution, and the user, the F&I manager, is such an important part of that process.”

Even ELEAD1ONE’s Wittenmyer seemed to walk back his comments about the future of the F&I manager, saying an F&I professional’s expertise in compliance, finance, and deal-structuring will be “critical” on the road to the digital deal. “F&I managers are the highest part of our compensation, and they’re certainly duly worth it. But the reality is you’ve got three people right now in the process that, with technology, will only require a one-person process. With that said, if I had a showroom full of strong F&I people doing everything, I know the deal would be set up all the way through to be right and profitable.”

Whatever the future holds, Protective’s Karchunas believes the franchise system will win out over online retailing firms like Carvana. In fact, he believes dealers, with their inherent built-in advantage, will just adopt their model once it’s proven — particularly the larger organizations that have the infrastructure to do so. One thing he’s sure of, however, is the evolution isn’t going away, and neither is the thinning margin situation.

(Photo Courtesy of NADA)

“We’re going to have to evolve. It’s scary, because you open the door and it’s dark in there. You can kind of see the shadows, but you don’t know what’s gonna happen,” he said. “But dealers are going to adjust. We’re adjusting. Agents are adjusting. And in the end, the outcome is more highly professionalized agents, super rationalized companies in our part of the business. And all of that is eventually going to drive up value to the consumer.”

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